Introduction
Merger, Acquisition, and Amalgamation are common terms in corporate world. All these terms are similar but they do have some differences. Merger is simply the fusion of at least two equal companies voluntarily where only one company loses its existence. Acquisition is an act where one entity purchases the business of another entity. Here, formation of a new entity or dissolving of target companies may or may not take place. Generally, acquiring a company is larger than the acquired or target company. Amalgamation is a kind of merger where two or more companies merge to form a new entity. In amalgamation, all the assets and liabilities of the merging companies get transferred to a new entity.
Difference Between Mergers, Acquisitions and Amalgamation
| Merger (Absorption) | Acquisition | Amalgamation (Consolidation) | |
| No. of Entities Involved | At least two entities are involved and one will cease to exist. A+B ————> A or B | At least two entities are involved and one takes over the assets and shares of others and influences the voting rights. All companies might exist together. | At least two entities are involved and create a new entity after consolidation. A+B ———–> AB or C |
| Impact on Share | Shares of the absorbing company are given to the shareholders of the absorbed company. | Buyer companies purchase more than % share of the target company. | Share of the new entity is given to the share of existing companies. |
| Size of Companies | The merging companies are of comparable size. | Bigger companies acquire smaller companies. | The participating companies are of comparable size and have similar terms of association. |
| Resultant Entities | Only one company exists. Absorbing companies absorb absorbed company and continue its existence. | Acquired companies cease to exist and become part of acquiring companies. | New entities exist and existing companies cease to exist. |
| Drivers for association | Absorbing companies initiate the deal. | An acquiring company initiates the deal with or without the consent of the acquired company. | Initiated by both parties with equal interest. |
| Financial Practices | Assets & Liabilities of absorbed companies are absorbed by the absorbing company. | One firm acquires assets/liabilities of the acquired companies. | Assets and Liabilities of the existing companies are transferred to new entities. |
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